Introduction

The word ‘rescission’ is ambiguous, and its various meanings must be carefully distinguished. Here, we will be discussing rescission in the sense of the process for setting aside a voidable contract and restoring the parties to their pre-contractual position. This is distinct from rescission (sometimes known as repudiation) for breach of contract, where the innocent party to a breach of contract exercises her right to terminate the contract and sue for damages and restitution of benefits conferred under the contract. The principal difference between rescission of a voidable contract and rescission for breach of a valid contract is that the former operates retrospectively, restoring both parties to their pre-contractual position, whereas rescission for breach operates prospectively, entitling both parties to enforce their accrued rights under the contract but removing any obligation to carry out the terms of the contract in the future.

When can a voidable transaction be rescinded?

A contract is voidable in equity for mistake, misrepresentation, duress, undue influence, unconscionable conduct, for breach of fiduciary obligation and under the rule in Yerkey v Jones. A voidable contract is valid until the plaintiff has elected to avoid it. It will then be set aside and both defendant and plaintiff must be restored to their pre-contractual position.